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Understanding the impact of severe hyperinflation experience on current household investment behavior

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  • Fajardo, José
  • Dantas, Manuela

Abstract

We propose that a hyperinflation event has a long-lasting effect on household investment behavior. We want to investigate whether future stock market participation can be influenced by a single extreme macroeconomic instability episode. We use data from the Brazilian Institute of Geography and Statistics and find that households who experienced hyperinflation as young adults (i) show lower willingness to invest in stocks than others, and (ii) are less likely to save for the future. Results hold after controlling for various household characteristics and other macroeconomic events.

Suggested Citation

  • Fajardo, José & Dantas, Manuela, 2018. "Understanding the impact of severe hyperinflation experience on current household investment behavior," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 60-67.
    • Handle: RePEc:eee:beexfi:v:17:y:2018:i:c:p:60-67
    DOI: 10.1016/j.jbef.2017.12.008
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    Cited by:

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    2. Georgarakos, Dimitris & Popov, Alexander, 2023. "I (Don't) Owe You: Sovereign Default and Borrowing Behavior," CEPR Discussion Papers 18300, C.E.P.R. Discussion Papers.
    3. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    4. Hua Guo & Yang Zhang & Yanling Peng & Tong Luo & Hong Wang, 2022. "Does COVID-19 Affect Household Financial Behaviors? Fresh Evidence From China," SAGE Open, , vol. 12(3), pages 21582440221, August.

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    More about this item

    Keywords

    Hyperinflation; Investments; Household behavior;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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